Darleen, my whole point was that just a couple of months ago there was evidence that the US national debt was growing DESPITE the fact that we have run soem $320 Billion in surpluses over the past two years.
When I went to the Bureau of Public Debt website several month ago, it reflected that the debt was higher by $67 Billion, than it had been in December, 1998.
The reason this was occurring, I opined was because SSTF surpluses were being parked in additional government debt instruments (T-bills, short and long-term), rather than being used to buy-out current debt holders. The whole basis behind the argument AG has made is that such buybacks would lead those holders to take their proceeds and use them for other investments in higher yielding commercial debt, or equity investments, thus freeing up capital that is being tied down by government debt.
But my argument was that I couldn't see why they would buy more risky debt if they felt they could repurchase someone else's government debt holders on a temporary retracement, comfortable in their knowledge that the government would be back to jack up the value of those bonds again as they bought back another tranche of national debt with surplus monies.
Now I figured that the government was selling short-term T-Bills to the SSTF until such time they could be resold and the proceeds applied to buying back publicly held 30 year T-Bills. But until such a time they actively began purchasing back 30 year bonds, they had to park the surplus somewhere, and the only place they are permitted to park it is in government debt, presumably short-term which they would create and then eliminate.
There are two recipients of surplus revenues. The govt is supposedly running a surplus from income tax revenues, tariffs, capital gains of some $80 Billion. But the biggest portion of the surplus is derived from FICA taxes, some $150 Billion, which should remain fairly constant so long as employment remains consistent. So it will be interesting to see how/if this year's market debacle affects the government surplus. But the FICA tax derived surpluses should remain somewhat intact and immune from the vagaries of the stock market.
The mechanics of how they are managing this surplus and then paying down long-term govt obligations is VERY difficult for me to properly track. We know they can only park SSTF surpluses in national debt. But most of us assumed they are merely making immediate purchases of publicly held debt with those surpluses. However, by tracking those BPD figures, it is clear this was not the case.
Anyway, if anyone can help with making heads or tails of how they are doing this, I would appreciate it.
And Darleen, you have to remember that although it would seem that the US is in debt, this is also the case with most other nations. Japan has a national debt equal to 130% of its GDP. I just read that even Saudi Arabia, despite its high oil revenues now, has a $160 Billion domestic debt, equal to its GDP.
Now the US, in comparison, owes $3.3 Trillion in debt to the public, with another $2.3 Trillion owed to itself in the form of future liabilities.
taapslink.gov
Whereas, the US GDP equated to $10 TRILLION, on an annualized basis.
bea.doc.gov
So yes, the figures are large, but the fact that the TOTAL national debt equates to 57% of GDP, and the public portion of that debt equals 33% of GDP, I'd say we're in pretty good shape compared to other nations.
But the risk is that the problems in all of these other nations eventually drags the US economy down as well.
So when trying to deal with which nations are so indebted that their currency is now at risk, I would suggest that the dollar is well placed in comparison to the competition.
Futhermore, think about the risks of a low US dollar to other economies that export to us. A lower dollar makes their goods less attractive over here and thus weakens THEIR economy.
In easier terms, the rest of the world treats the US as a consumer of their goods. They are businessmen looking to compete for access to lucrative US markets. But when US consumers stop buying, foreign businesses will suffer far worse than will we.
But for US growth companies, a weaker US dollar is quite desirable.
Regards,
Ron |
